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Softbank preps Snapdeal for sale, moves to buy Kalaari, Nexus stakes

LiveMint 04-04-2017Shrutika Verma

New Delhi: Snapdeal’s three biggest investors—SoftBank Group Corp., Kalaari Capital and Nexus Venture Partners—took the first steps towards resolving their rift, potentially clearing the way for a sale of the e-commerce marketplace to one of its bigger rivals, Flipkart or Paytm, according to people familiar with the discussions.

Quotes in the article

At a board meeting of Jasper Infotech Pvt. Ltd, the company behind Snapdeal, on Tuesday, SoftBank showed interest in buying a part of the stake owned by Kalaari and Nexus, three people familiar with what transpired at the meeting said on condition of anonymity.

Kalaari and Nexus are seeking a sum of $100 million each for their stakes, two of the people said. Snapdeal promoters Kunal Bahl and Rohit Bansal have also asked SoftBank for a $100 million payout to them and their management team in order to clear the way for a sale, the two added.

SoftBank is negotiating the price, they said.

Snapdeal and SoftBank declined to comment. Kalaari and Nexus did not respond to Mint’s queries.

One of the three people said that all stakeholders are willing to reach an agreement because “cash is running out” at Snapdeal. “But a compromise will be reached only if the deal makes financial sense for everyone,” this person added.

Meanwhile, Kalaari Capital managing director Vani Kola has resigned from the board of Snapdeal, the three people cited above said. Kola’s resignation is a sign of Kalaari’s willingness to reach a deal with SoftBank, they added.

Mint reported on 31 March that Kalaari Capital and Nexus had disagreed with SoftBank over the valuation of Snapdeal in a potential funding round or sale.

While Kola has resigned from Snapdeal’s board, Kalaari still retains veto powers on significant issues such as a sell-out, the three people said.

Snapdeal is the largest investment for Kalaari and Nexus, and a bad deal could be damaging for the two home-grown venture capital firms.

SoftBank is eager to sell Snapdeal to Flipkart even in a cut-price all-stock deal and then invest more cash in the buyer, said the three people cited above. That may well be the best deal on offer, with Snapdeal being valued at around $1 billion, they added.

Also Read: Under pressure, Snapdeal woos employees with promises of profit

“Alibaba is not willing to offer even a billion dollars for Snapdeal,” said the first person. However, a deal with Alibaba is not completely off the table, he added.

Snapdeal was valued at $6.5 billion in its last funding round in February 2016 but its value in a potential deal will be a fraction of that, the people said.

SoftBank owns 33% of Snapdeal, while Nexus owns roughly 10% and Kalaari nearly 8%, according to documents filed with the Registrar of Companies. Chief executive officer Kunal Bahl and chief operating officer Rohit Bansal, who are also co-founders, together own less than 6.5% of the company after selling part of their stake.

Still, Kalaari and Nexus, two of the earliest institutional backers of Snapdeal, enjoy strong shareholder rights.

The boardroom battle has amplified the crisis at Snapdeal, delaying a potential lifeline.

Since January, Snapdeal has cut hundreds of jobs, slashed spending on discounts and marketing and seen a sharp drop in monthly sales.